Predicting job growth, U.S. businesses covet easier trade with Russia

After getting Congress to pass new trade deals with South Korea, Colombia and Panama six months ago, free-trade proponents have set their sights on Russia, eager to cash in on one of the world’s largest and fastest-growing economies.

After getting Congress to pass new trade deals with South Korea, Colombia and Panama six months ago, free-trade proponents have set their sights on Russia, eager to cash in on one of the world’s largest and fastest-growing economies.

With Russia set to become a member of the World Trade Organization in July, they say Congress must act quickly to allow the United States to expand trade opportunities with Moscow. U.S. businesses hope to begin sending a flood of products – everything from apples to paint to airplanes – to the 140 million consumers in Russia, a nation so large that it spans nine time zones.

But there’s one big hurdle to overcome: In 1974, Democratic Sen. Henry “Scoop” Jackson of Washington state got a unanimous Congress to restrict trade with the former Soviet Union because it wasn’t allowing Jews to emigrate.

Opponents of the 38-year-old law say it’s an old issue and that it’s time to normalize permanent trade relations with Russia. Currently, trade is allowed on a year-by-year basis as long as the president certifies that Russia is complying with the 1974 law, which has happened routinely for the past 20 years.

The stakes are particularly high for Washington state, which increased its exports to Russia by 80 percent from 2010 to 2011. Washington ranks fifth among the states in Russian exports, trailing Texas, Illinois, California and New York.

The proposed deal would reduce tariffs on a wide array of goods, slashing duties on commercial airplanes alone by half. That could be a huge boon for Boeing, which has its largest manufacturing plants in Washington state. Predicting that Russian carriers will need more than 1,000 new passenger airplanes in the next 20 years, Boeing says that getting Congress to approve the trade plan is its top trade priority this year.

At a hearing of the Senate Finance Committee last month, Democratic Sen. Max Baucus of Montana, the panel’s chairman, who visited Russia in February, called the 1974 law “a relic of the past” and predicted that U.S. exports to Russia would double within five years if Congress repealed it.

Eric Schinfeld, the president of the Seattle-based Washington Council on International Trade, said passing the deal should be a “no-brainer” for Congress.

“We love our good old Senator Scoop,” he said. “But you know, the funny thing about this is that he passed this amendment to deal with the Soviet Union, which doesn’t even exist anymore. And it’s just been applied to Russia for something that does not happen anymore: Russia has no restraints on Jewish immigration to Israel right now, which is what this was all about back in the day.”

So far, the call to repeal the law has found bipartisan appeal from two members of the Washington state congressional delegation who sit on the House Ways and Means Trade Subcommittee: Democratic Rep. Jim McDermott and Republican Rep. Dave Reichert.

But it won’t be easy. Some members of Congress promise to oppose repealing the trade restrictions unless Congress passes legislation to promote human rights in Russia.

“I don’t see this having an easy path,” Reichert said in an interview.

He predicted that critics would “demagogue this effort” the same way that opponents lined up against the trade pacts with South Korea, Colombia and Panama. But he said Congress had no time to waste.

“Either we get on board and we’re part of building a relationship with Russia or we once again lose market share and we get behind,” he said. “And once we finally get off the stick and do something, then we’ve got to play catch-up in the Russian market. And I just don’t think that’s smart for us.”

McDermott agreed that the repeal faces much resistance, but he predicted that Republicans in the House of Representatives will be under great pressure from the business community, which increases the odds of it happening.

“I would not be surprised if it happened, because I think the economic forces in the country will begin to say to these Republicans, ‘Hey, you guys, do something, will you please?’ ” he said in an interview. “And I think at that point it will start to move.”

The proposal drew plenty of resistance at the March 15 hearing of Baucus’ committee.

Jon Kyl, an Arizona Republican, warned that repealing the law “isn’t a slam dunk” and said human rights “cannot be divorced from the discussion of our economic relationship” with Russia.

“There is scant evidence that the Russian state operates in good faith,” Kyl said. “There’s a troubling pattern of intimidation, disregard for the rule of law, fraudulent elections, human rights abuses and government-sanctioned anti-Americanism.”

Sen. John Cornyn of Texas complained that in February, Russia joined China in blocking a resolution by the United Nations Security Council that would have endorsed an Arab League plan to oust Syrian President Bashar Assad, whose citizens have risen up against him.

“At what point, whether it’s corruption, whether it’s enabling international terrorist states like Iran, whether it’s arming thugs and murderers like President Assad in Syria, do we say the cost is just too high in terms of sacrificing our basic values and protecting human rights?” asked Cornyn, who’s a Republican.

On the Democratic side, Sen. Robert Menendez of New Jersey said the trade deal would be “a huge benefit” to Russia, politically and economically.

“And a lot of us aren’t feeling like this is a good time to be rewarding Russia for anything,” he said.

Schinfeld said the issue was largely moving “under the radar” but that it was likely to become more high-profile in coming months. In the meantime, he said, his association has begun lobbying members of Washington state’s congressional delegation, asking them to set aside the human rights issues and focus on trade.

“Obviously, I totally understand why it’s getting caught up in a lot of other issues with regard to human rights and democracy and things like that in Russia, but these really are two separate issues, and we really want to treat them as two separate issues,” he said.

McDermott and Washington state’s U.S. senators, both Democrats, oppose such an approach.

In a statement released by her press secretary, Sen. Maria Cantwell, a member of the Finance Committee, said that normalizing trade with Russia “is a great opportunity” for the state but added: “We must do so in a way that preserves human rights safeguards, in the spirit of Senator Scoop Jackson’s legacy."

Matt McAlvanah, a spokesman for Sen. Patty Murray, said Murray would consider any plans to repeal the 1974 law “that are done in conjunction with human rights protections.”

McDermott, the top-ranked Democrat on the House Ways and Means Trade Subcommittee, said Congress had long used trade agreements “as a way of trying to shift countries more towards a rule of law,” and that that should apply to Russia, too.

In Washington state, exports to Russia grew from $247 million in 2010 to $445 million in 2011, according to the Coalition for U.S.-Russia Trade, a group of business interests that’s promoting repeal of the 1974 law. That compares with a 21 percent increase in exports worldwide for the state over the same period.

Since 2006, the group said, Boeing has done $19 billion in business with Russian airlines, but small companies are cashing in, too.

Among them: In Tacoma, Parker Paint, a 67-year-old company, has sold its paints and coatings to outlets in Russia, Mongolia and the Pacific Islands; in Bellingham, Bornstein Seafoods has sent its frozen fish to Russian customers; and in East Wenatchee, Northern Fruit Co. has exported its apples.

Overall last year, Washington state’s exports to Russia directly supported at least 1,460 jobs, according to the Business Roundtable, another group that’s promoting the trade deal.